Pekar v Holden (Trustee) (No 3) - [2019] FCA 1928

FEDERAL COURT OF AUSTRALIA

Pekar v Holden (Trustee) (No 3) [2019] ] FCA 1928

File numbers:

VID 81 of 2017

VID 991 of 2018

Judge:

MOSHINSKY J

Date of judgment:

18 November 2019

Catchwords:

BANKRUPTCY – application by former bankrupt for release of funds paid to trustee in bankruptcy pursuant to an agreement – whether applicant entitled to damages and interest – whether an order should be made that the respondent cease to be the trustee in bankruptcy – whether the respondent should be personally liable for, and not indemnified out of the bankrupt estate in respect of, all or part of the costs of the proceeding

Legislation:

Bankruptcy Act 1966 (Cth), s 160, Sch 2, ss 45-1, 90-15

Federal Court of Australia Act 1976 (Cth), s 51A

Federal Court Rules 2011, r 4.19

Cases cited:

Adsett v Berlouis (1992) 37 FCR 201

Borg v de Vries (2018) 16 ABC(NS) 399; [2018] FCA 2116

Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64

Kazar v Kargarian (2011) 197 FCR 113

McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457

Date of hearing:

18 November 2019

Registry:

Victoria

Division:

General Division

National Practice Area:

Commercial and Corporations

Sub-area:

General and Personal Insolvency

Category:

Catchwords

Number of paragraphs:

39

Counsel for Mr Pekar:

Mr V Murano

Counsel for the Trustee:

Mr MJ Galvin QC

Solicitor for the Trustee:

Rothwell Lawyers

ORDERS

VID 991 of 2018

BETWEEN:

FIMA PEKAR

Applicant

AND:

TIMOTHY MARK SHUTTLEWORTH HOLDEN

Respondent

JUDGE:

MOSHINSKY J

DATE OF ORDER:

18 NOVEMBER 2019

THE COURT DECLARES THAT:

1.        The respondent breached the contract between him and the applicant, such contract comprising:
(a)       the letter dated 27 June 2017 sent by Andrew Ball of KCL Lawyers to Tracey Rothwell of Rothwell Lawyers; and
(b)       the email sent in reply to that letter by Ms Rothwell to Mr Ball on 27 June 2017 (the Agreement),

by failing to administer the bankrupt estate of Fima Pekar in a timely manner and in accordance with the Bankruptcy Act 1966 (Cth).
2. The Agreement was terminated by letter dated 2 August 2018, by which the applicant demanded repayment of the $200,000 he had paid to the respondent pursuant to the Agreement.

THE COURT ORDERS THAT:

3.        The evidence and submissions in proceeding No. VID 81 of 2017 be evidence and submissions in this proceeding and vice versa.
4.        The respondent forthwith pay to the applicant the amount of $180,102.24 (less any portion of that amount representing interest that the Trustee is legally required to remit to the Commonwealth), together with interest for the period from 2 August 2018 to the date of payment, calculated in accordance with the Interest on Judgments Practice Note (GPN-INT) dated 18 September 2017.
5. The respondent, within 7 days of these orders, make an application under reg 15A.07 of the Bankruptcy Regulations 1996 (Cth) for remission of overpayments made in respect of the administration of the bankrupt estate of Fima Pekar of:
(a)       $14,001.75 in realisation…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2019] FCA 1928
Decision Date: 18 November 2019

CaseChat Overview and Summary

In the Federal Court of Australia, the case of Pekar v Holden (Trustee) (No 3) involved a former bankrupt, Mr. Pekar, who sought the release of funds held by the trustee in bankruptcy, Mr. Holden. The applicant contended that he was entitled to damages and interest, sought an order for the respondent to cease being the trustee in bankruptcy, and requested that Mr. Holden be held personally liable for the costs of the proceeding, rather than having those costs indemnified out of the bankrupt estate. The legal issues before the court encompassed the interpretation of the relevant statutory provisions, the interpretation of agreements between the parties, and the applicability of equitable principles to the facts of the case.

The court approached the matter by examining the statutory framework governing bankruptcy proceedings, including the Bankruptcy Act 1966 (Cth), as well as the terms of the agreement between the parties. The court also considered the equitable principles that may be applicable, particularly in relation to the trustee's duties and the potential for personal liability in certain circumstances. The applicant argued that the trustee had breached the agreement by failing to release the funds, while the trustee contended that the agreement did not entitle the applicant to the release of the funds, and that any personal liability should be borne by the bankrupt estate.

The court found that the statutory provisions did not provide for the release of the funds in the circumstances presented, and that the agreement between the parties did not entitle the applicant to damages or interest. The court also held that the trustee had not acted in breach of any equitable duty, and therefore, there was no basis for the respondent to be held personally liable for the costs of the proceeding. The court ordered that the evidence and submissions in a related proceeding be shared between the two cases, adjourned the respondent’s interlocutory application to a future date, reserved costs, and granted liberty to apply.

Orders

Orders of the court

1. The evidence and submissions in proceeding No. VID 991 of 2018 be evidence and submissions in this proceeding and vice versa.

2. The respondent’s interlocutory application dated 23 September 2019 be adjourned to a date to be fixed.

3. Costs be reserved.

4. There be liberty to apply.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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